Horsham Mayor David Grimble and Kane Constructions project manager Peter Mann helped mark the official start to construction on the $19.6-million project.

A small crowd gathered at the construction site at 9am to watch the historic moment.

The sod-turning has been almost five years in the making.

In March 2009, Horsham Rural City Council announced it had applied for up to $6 million through the Federal Government's Regional and Local Communities Infrastructure Program.

Back then, the redevelopment was estimated to cost $12 million.

There have since been a number of project designs, community meetings, two Victorian Civil and Administrative Tribunal cases and multiple cost increases.

The final total project cost of more than $19.6 million includes a new 501-seat auditorium, art gallery education space and streetscape works in Pynsent and Wilson streets.

"The project will deliver a modern, central hub for the Horsham community," Mr Delahunty said.

Demolition of the town hall supper room started on Wednesday afternoon.